The Emerging eSport Market: Analyzing the Impact of Virtual and Augmented Reality - David Publishing
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Chinese Business Review, Feb. 2020, Vol. 19, No. 2, 37-54
doi: 10.17265/1537-1506/2020.02.001
D DAVID PUBLISHING
The Emerging eSport Market:
Analyzing the Impact of Virtual and Augmented Reality
Silvia Cacho-Elizondo
IPADE Business School, Mexico City, Mexico
José-Domingo Lázaro Álvarez
ICAMI Business School, Guadalajara, Mexico
Universidad Panamericana, Guadalajara, Mexico
Victor-Ernesto Garcia
YBVR, Madrid, Spain
This article explores the impact of immersive technologies like virtual and augmented reality on video game
competitions. These electronic games are structured under an analog scheme similar to that of the sports industry,
which has given rise to a new and rapidly growing global market known as “eSports”. eSports are a confluence of
innovation, strategy, and marketing, in which players, or gamers, come together and compete with the same
intensity and commitment as professional athletes. Gamers participate in local, national, and worldwide
competitions that are broadcast over a variety of media, and are sponsored by large transnational companies/brands.
For these companies, the eSports phenomenon represents a new paradigm capable of revolutionizing the very
concept of entertainment. In this article, we propose a conceptual framework through which we can analyze the
business repercussions of this new technology from an integral perspective that takes into account players, sports
clubs, publishers, sponsors (brands), spectators and broadcasters. Through this analysis of representative companies
from the eSports sector, we explore their evolution and future tendencies, like virtual-reality and augmented reality.
The industry participants agree that such groundbreaking these technologies are going to be crucial to the future of
eSports because they will be the new way of playing and a marketing revolution. This project seeks to stimulate
further research into the profound technological transformation the entertainment sector is now undergoing with the
digitalization and implementation of immersive technologies. Special attention will be paid to the
institutionalization and professionalization of video game competitions and their progressive homologation with
traditional sports.
Keywords: eSports, entertainment, videogames, Virtual-Reality (VR), Augmented-Reality (AR)
Silvia Cacho-Elizondo, Ph.D., professor & academic director of In-Company Programs, IPADE Business School, Mexico City,
Mexico.
José-Domingo Lázaro Álvarez, associate professor, ICAMI Business School, Guadalajara, Mexico; associate professor, School
of Economics, Universidad Panamericana, Guadalajara, Mexico.
Victor-Ernesto Garcia, YBVR, Madrid, Spain.
Correspondence concerning this article should be addressed to Silvia Cacho-Elizondo, IPADE Business School, Floresta # 20;
Col. Clavería, Delegación Azcapotzalco; Mexico City 02080, Mexico.38 ANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY
Introduction to the Network Society
The development and penetration of Internet connectivity among global users—be it using a computer,
tablet, or smartphone—has given rise to a new era that Castells (2006) has called the Network Society.
This new society utilizes Information and Communication Technologies (CITs) to transform the social and
economic environment and generate a wave of profound technical innovation. This transformation has led to
use of technological media in both professional and domestic settings, being exploited as mass social
communication media as well as tools for improving productivity and competitiveness.
Adoption of these technologies linked to software, hardware, and internet, has also brought about dramatic
change in throughout the entertainment industry, ranging from music to television, and eventually to
videogames—1998 saw the introduction of network play, or online multiplayer functions, which according to
Lafrance (2003), triggered the proliferation of online competition between players from all over the world.
The popularization of online gaming in recent years has transcended traditional concepts of entertainment
and introduced a new cultural dimension that fosters communities of players, teams, and supporters that are
brought together by highly competitive digital tournaments. The success of these tournaments has not gone
unnoticed by large transnational companies, which have begun to show great interest in organizing, sponsoring,
and broadcasting these events.
According to SuperData’s annual report, interactive entertainment, which includes videogames, generated
120.1 billion USD in 2019.1 This underscores the rapid emergence of eSports, which turns digital tournaments
into social phenomena that create a sense of belonging among millions of people throughout the world, and is
now a strategic market with a value of nearly 1 billion USD.
Also, free-to-play games revenue increased by 6% to $87.1B in 2019. Mobile games accounted for 6 of
the top 10 free-to-play titles in 2019. Table 1 shows the top free-to-play games by revenue in 2019.
Table 1
Top Free-to-Play Games by Revenue (2019)
Ranking Title Publisher Revenue
1 Fortnite Epic Games $1.8B
2 Dungeon Fighter Online Nexon $1.6B
3 Honour of Kings Tencent $1.6B
4 League of Legends Riot Games $1.5B
5 Candy Crush Saga KING Digital Entertainment $1.5B
6 Pokémon GO NianIc, Inc. $1.4B
7 Crossfire SmileGate $1.4B
8 Fate/Grand Order Aniplex Inc. $1.2B
9 Game for Peace Tencent $1.2B
10 Last Shelter: Survival Long Tech/im30.net $1.1B
Source: SuperData Digital Games and Interactive Media Year in Review (2019).
Premium games revenue declined 5% to $18.9B in 2019. Lower premium game earnings in 2019 were the
result of fewer blockbuster game releases than in 2018. Table 2 presents the top premium PC and console
games by revenues.
1
SuperData Digital Games and Interactive Media Year in Review-2019 (SuperData, 2020).ANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY 39
Table 2
Top Premium PC and Console Games by Revenue (2019)
Ranking Title Publisher Revenue
1 FIFA 19 Electronic Arts, Inc $786M
2 Call of Duty: Modern Warfare Activision Blizzard, Inc. $645M
3 Grand Theft Auto V Take Two Interactive Software, Inc $595M
4 FIFA 20 Electronic Arts, Inc $504M
5 Call of Duty: Black Ops IIII Activision Blizzard, Inc. $487M
6 NBA 2K19 Take Two Interactive Software, Inc $370M
7 Tom Clancy’s The Division 2 Ubisoft $370M
8 Tom Clancy’s Rainbow Six: Siege Ubisoft $358M
9 Borderlands 3 Take Two Interactive Software, Inc $329M
10 Sims 4 Electronic Arts, Inc $311M
Source: SuperData Digital Games and Interactive Media Year in Review (2019).
Methodology
The methodology employed in this study is descriptive-qualitative. First, it proposes a conceptual
framework that classifies the main actors, the ways of participating in a competition, the milestones for growth
in the eSports market, and its social and economic reach. Then it will analyze the uses and applications virtual
and augmented reality could have in the eSports industry using concrete examples for both technologies—for
this, we have selected cases studies of companies operating in the eSports sector. Finally, the study concludes
by presenting a hypothetical future in which we believe the combination of spectacle and immersive experience
will detonate the future success of the eSports ecosystem.
The conceptual framework focuses on reviewing and updating the context around eSports, and in
predicting the impact of a future scenario in which this phenomenon is combined with immersive technologies
such as virtual reality and augmented reality.
Later, the methodology used multiple case studies from a descriptive-qualitative perspective. These case
studies allow us to analyze companies and specific technological developments, whose results are certain only
in those cases in particular. Through this methodological process we will obtain a more complete perception of
the market by studying it as a holistic entity, whose attributes are only understood in the context of all of its
factors. To achieve this, we must study the industry as a whole.
For this purpose, we present descriptions, interpretations, and proposals of change oriented to produce a
theoretical contribution of inductive order that allows explaining complex causal relations, analyzing
longitudinal processes of change, generating theories from the study of the factors that influence the behaviors
of the actors, and understanding the repercussions of the economic and social context in which this
phenomenon emerges.
Among the questions that we seek to explore in this research are:
y Who are the main actors in the industry and how are they related?
y What are the forms of participation in a competition of this nature?
y What have been the milestones in the growth of this market and what is its current economic and social
scope?
y What are the uses and applications that virtual reality and augmented reality could have in this area?40 ANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY
y What business precedents exist for both technologies in this market?
y What could be the hypothetical results of a successful combination of virtual reality and augmented
reality?
Together with the above questions, three theories will be raised on how e-Sports could evolve to achieve
significant and long-term growth under criteria of inclusion, sustainability, and profitability:
(1) To adapt the business model of the industry to increase the levels of professionalism and
competitiveness through adding flexibility to the role currently played by publishers.
(2) To grow the specular that provides the entertainment to promote an ecosystem of startups focused on
the permanent innovation of the gaming experience.
(3) To evolve the current structure of the industry to facilitate the introduction of new, plural, and
heterogeneous actors that could expand e-Sports to other business categories.
These theories will be detailed as complementary recommendations by the authors to channel the growth
and expansion of this phenomenon. For this research’s initial approach, we offer a first hypothesis about what
eSports should do:
y Become more spectacular to attract a wider and more diverse set of actors.
y Evolve the business model, altering the current structure to facilitate introduction of virtual and augmented
reality.
Conceptual Framework
The eSports Phenomenon
The term eSports (also known as competitive gaming, organized play, e-gaming or pro-gaming) is a
contraction that combines the words electronic and sports. This compound word describes the world
of competitive and organized gaming in the language of conventional sport—one made up of players and
teams competing against one another in well-known videogames, and followed by millions of fans around
the world that watch events in person or through online streams and broadcasts. Hamiri (2015) describes
eSports as: “A form of sport where the main aspects of the sports are facilitated by electronic systems; the
input from players and teams, as well as the output of eSports systems is mediated by man-machine
interfaces.”
Wagner (2006, p. 4) emphasizes the competitive nature of eSports, as they are: “eSports is an area of sport
activities in which people develop and train mental or physical abilities in the use of information and
communication technologies.”
It is worth noting that not all videogames can be considered electronic sports, as they must meet a series of
specific conditions:2
(1) The game makes possible a direct competition between two or more participants.
(2) Players compete on an even playing field, with victory determined by the skill and dexterity of the
competitors.
(3) There are leagues, tournaments, and official competitions with professional players and teams that
participate under formal rules.
2
From Juan Casanova’s description in ¿Qué son los deportes electrónicos? (AS, 06/04/2018) as well as Bárbara Gimeno’s¿Qué
requisitos debe cumplir un videojuego para ser un e-Sport? (eSports unlocked,15/01/2018).
www.esportsunlocked.com/especiales/que-hace-falta-para-que-un-juego-sea-esports.ANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY 41
(4) It is a popular competition with an ample group of players, and there is interest from traditional and
alternative media in broadcasting the event.
(5) It involves physical and mental preparation, promoting the values of sportsmanship and personal
improvement.
Among the most important videogames that comply with the above requirements are those involving
roleplaying, shooter scenarios, cards, and sports simulations. Table 3 presents the most recognized eSports
games.
Table 3
Most Recognized Videogames in the eSports Ecosystem
Launch Title Publisher Category
1993 FIFA EA Sports Soccer
2001 Pro Evolution Soccer Konami Soccer
2009 League of Legends Riot Games Multiplayer Online Battle Arena (MOBA)
2012 Counter-Strike: Global Offensive Valve Corporation First-Person Shooter (FPS)
2013 D.O.T.A. 2 Valve Corporation Multiplayer Online Battle Arena (MOBA)
2014 Hearthstone: Heroes of Warcraft Blizzard Entertainment Online Collectible Card
2016 Overwatch Blizzard Entertainment First-Person Shooter (FPS)
2017 Fortnite Epic Games Battle Royale
Source: Developed by the authors.
In this market’s value chain we find a group of actors that generate synergies and give purpose to the
functioning of the eSports ecosystem. Below we offer a brief description of each of the principal actors:
Players: There are at least three relevant categories of gamers in the context of eSports, according to their
behavior and level of play:
y Casual: This describes the vast majority of players and the main audience of eSports tournaments. They
are sufficiently enthusiastic to be deeply interested in eSports, yet they lack the dedication or ability to compete
in organized tournaments.
y Streamers/entertainers: These are high-performance gamers that focus on the social aspect of eSports, and
often have their own channels on various streaming platforms through which to reach their audiences. Although
they typically have a much higher skill level than casual players, their main goal is not to compete in formal
tournaments, but to provide entertainment. This means that many streamers perform in-game maneuvers that
are not ideal from a purely tactical standpoint, but that are flashier and aimed at entertaining their followers.
Streamers generate revenue according to the size of their audiences, making use of the monetization tools
they provide (advertising, subscriptions, donations, etc.). They also generate revenue from direct sponsorships,
as they are generally influencers with strong personal brands that are attractive to teams, sponsors, and
followers.
y Professionals: These are gamers that participate in formal tournaments. Much like streamers, they are
influencers. Their focus is solely on competitive gaming, leaving aside flashy maneuvers in favor of tactical
effectiveness. The main source of income for this group comes from prize money earned in tournaments,
followed by direct (to individuals) and indirect (given to the teams they play for) sponsorships. One such gamer
is the South Korean Lee Sang Hyeok(alias “Faker”), who is not only the most recognized and formidable
League of Legends player, but the most accomplished gamer in the history of eSports.42 ANA
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Interaaction between streamers anda professionals categories is constantt and fluid: m many professiionals begin
their careerrs as streameers, until proffessional team
ms discover th
hem. It is alsoo common foor professionaals to act as
streamers outside
o of thee bounds of formal
fo tournaaments, althou
ugh this dualiity is not pressent always, and when it
is, they typpically occur in ure 1 shows thhe eSports value chain.
i separate annd distinct mooments. Figu
Fiigure 1. eSportss value chain. Source:
S MTG.coom.
Sportts Clubs: MuchM like connventional spports, eSportts features clubs that haave teams co ompeting in
organized games. Thesee clubs are always on thee lookout for new gamers,, as well as w ways to generrate interest
among speectators and spponsors. Onee successful example
e is the U.S. club FaZe
F Clan, w
which competes in games
like Call of Duty, Coounter-Strike: Global Offfensive, Oveerwatch, PlaayerUnknownn’s Battlegro ounds, Tom
Clancy’s Rainbow
R Six: Siege and FIIFA, as well as a other teamms that are forrging their ow
wn reputation ns like Team
Solo-Mid (TSM).
( Therre are also exxisting majorr traditional sports clubs that are opeening their own eSports
divisions, like
l soccer cluubs FC Barceelona, PSG, Borussia
B Dorttmund, AS Monaco,
M and S
Shalke 04.
Publishers: A nottable distincttion between eSports and traditional sports is the w way ownersh hip over the
sports prodduct itself is structured. Inn traditional sports,
s the gaame’s rules do
d not have aan owner as such.s In the
case of eSpports there is an exclusivee title-holder for the game, both its inteernal (actions, fields, norm ms, etc.) and
external ellements (organization, offficiating…). The compan ny with excllusive title tto a game iss called the
Publisher, organizer or developer. Among
A the moost importantt publishers are:
a Riot Gam mes, Activision, Blizzard,
Epic Gamees, EA Sportss, Ubisoft, Caapcom, Valvee, and Hi-Rezz Studios.
Sponssors: There area two types of sponsors in eSports: en ndemic and non-endemic.
n . The first is brands
b with
a direct relationship to gaming
g (gam
me and hardwaare developerrs, and internnet operators),, while the seecond group
is made upp of companiees from all inddustries that are
a interested d in the targett audience.
An exxample of an endemic spoonsorship wouuld be the paartnership bettween Dell annd Team Liqu uid—one of
the best gaaming teams in the worldd—in outfittiing an 8,000 0 square foot building in Los Angeless called theANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY 43
Alienware eSports Training Facility. The facility features gym equipment, administrators, private chefs, sports
psychologists, nutritionists, and of course dozens of high-performance computers. 3 An example of a
non-endemic sponsorship would be the Virtual LaLiga eSports, a FIFA 19 competition in Spain.
Broadcasters: In recent years, eSports have become a social phenomenon boosted by networks like the
BBC, OSN, SporTV, and Super Channel, as well as online streaming platforms like Twitch (owned by Amazon)
and YouTube (owned by Google). This content is most popular among the millennial generation, and
particularly among young males. The audience for gaming video content (GVC) grew by 5% to reach 944M
people in 2019. Thanks to more robust monetization offerings, Twitch generated more revenue in 2019 than
YouTube ($1.54B vs. $1.46B) despite a much smaller audience4. The role of streaming platforms goes beyond
simple diffusion by making the life of a streamer economically viable, as they can create revenue using the
monetization tools available through these platforms. Twitch in particular has stood out thanks to the
introduction of Cheers, subscriptions, and integration with Amazon Prime.
Spectators: These are the millions of people that watch tournaments and competitions via conventional
media or online. eSports have attracted a considerable following in the U.S., China, and South Korea, where
gamers and clubs are gaining more attention through the work of broadcasters.
Tournaments are organized differently depending on the publisher, organizer, or developer. To understand
the functional methodology we can look to the system5 employed by the Electronic Sports League (ESL),
which defines three levels of competition:
Level 1: Open Cups
These are weekly, independent competitions through which players earn points. Accumulated points give
players the option at the end of each month to collect a prize (not necessarily monetary). These competitions
are not broadcast and are only available online.
Level 2: ESL Major
These are weekly online competitions that are broadcast. There are also points gained for each cup won,
and a weekly ranking is established. In some cases money prizes are awarded.
Level 3: ESL Pro
These are professional competitions presented in two formats:
League: This is a regular eight-team league from which six teams qualify for playoffs. The bottom two
teams play a “Relegation Phase” against the top two teams of the second division for their spots in the first
division. All games are broadcast and playoff competitions are played face-to-face.
Classic: This is a previous qualification tournament where the best eight compete in the final phase. All
games are broadcast and the finals are played face-to-face.
Origen and Evolution of the eSports Industry
It is difficult to establish a specific moment in which eSports were born, but according to Hiltscher and
Schölz (2017), that moment was October 19, 1972 in California and involved the game Spacewar! That year,
3
Esports get serious: Alienware, top team partner on training sites (CNET.com, January 9, 2018),
www.cnet.com/news/esports-alienware-team-liquid-partner-on-training-sites).
4
SuperData Digital Games and Interactive Media Year in Review, 2019 (Nielsen, 2020).
5
Information obtained from the ESL website (www.eslgaming.com).44 ANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY
Stanford University students were invited to the “Intergalactic Spacewar Olympics,” where they would face off
to win a subscription to Rolling Stone magazine.
In 1980, Atari organized the Space Invaders Championship in New York City for more than 4,000
participants.6 This was the first event to attract a sizable, heterogeneous group of players with the purpose of
competing in an established tournament with formal rules.
In the 1990s, Nintendo organized a number of events like the Nintendo World Championship and
Nintendo PowerFest, with small competitions in a number of cities across the U.S. and Canada, the winners of
which would compete in a national tournament. Around that same time, Blizzard Entertainment (Videogame
Company and creator of StarCraft) began organizing tournaments among enthusiasts in South Korea, taking
advantage of the PC Bangs (cybercafés) as meeting points. From this effort sprung numerous teams and online
competitions.
The real boom in this market occurred in 1997 with the creation of the Cyberathlete Professional League
(CPL), which was the first organization dedicated solely to developing eSports tournaments. This was followed
by the German-based Electronic Sports League (ESL), which soon became the largest eSports organizer and
producer in the world.
The industry’s rise did not go unnoticed by large corporations. For example, in 2015 Swedish
entertainment company Modern Times Group (MTG) acquired ESL for 78 million euro (86.3 million USD), by
which it obtained a majority stake of 74%.7 In 2016, Spanish communications group Mediapro, paid 4.6
million euro for a majority stake in Fandroid, owner of the Liga de VideojuegosProfesional (LVP), a hugely
popular competition in Europe.8
Another milestone occurred in Asia in the year 2000 with the creation of the eSports organization World
Cyber Games (WCG). Sponsored by Samsung and the South Korean Ministry of Culture, Sport, and Tourism,
WGC was meant to be an annual international tournament, and its creation sparked widespread interest in
eSports throughout all of Asia. This new popularity became evident when on November 18, 2003, the General
Administration of Sport in China formally approved eSports as sport number 99 in their official sports program
for the People’s Republic of China.
Implicit recognition of eSports as a sport occurred in the U.S. in 2013, when Canadian Danny Le (known
as “Shiphtur”) became the first professional League of Legends gamer to receive a U.S. P-1A visa, reserved for
internationally recognized athletes.9 The meteoric rise of eSports attracted the attention of large traditional
sports teams, which led to the creation of the NBA 2K eSports League (a professional videogame league in
6
Sources differ on the number of attendees at this event. Some claim 10,000 attended, while others cite 4,000. We are inclined to
cite the 4,000 figures as it comes from a reputable source printed nearer the date of the event in question: 4,000 line up to join
battle against electronic invader, New York Times (June 30, 1981). www.nytimes.com/1981/06/30/nyregion/4000-line-up-to-join
-battle-against-electronic-invader.html.
7
La televisión apuesta por los eSports: Modern Times Group compra la liga de videojuegos ESL por 78 millones
(elEconomista.es, June 2, 2015). www.eleconomista.es/tecnologia-videojuegos/noticias/6839711/07/15/La-television-apuesta-por-
los-eSports-Modern-Times-Group-compra-la-liga-ESL-por-78-millones.html.
8
Mediapro apuesta por los eSports: compra la LVP por 4,6 millones y crea la mayor liga europea (elEconomista.es, October 6,
2016).
www.eleconomista.es/negocio-digital/noticias/7874937/10/16/Mediapro-apuesta-por-los-eSports-se-alia-con-Fandroid-para-crear-
la-mayor-liga-europea.html.
9
Online game League of Legends star gets U.S. visa as pro athlete (Los Angeles Times, August 7, 2013).
www.articles.latimes.com/2013/aug/07/business/la-fi-online-gamers-20130808).ANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY 45
which 17 NBA franchises participate)10 in 2017.
On February 27, 2018, FC Barcelona signed an agreement with eFootball.Pro and KONAMI to participate
in the first edition of the eFootball. Pro League along with other major European soccer clubs like AS Monaco
and FC Shalke 0411.
The clamor generated by eSports has spawned discussion in many sectors about their inclusion as an
Olympic sport. At the Olympic Esports Forum held in July of 2018 in Lausanne Switzerland, members of the
International Olympic Committee (IOC) and the Global Association of International Sports Federations
(GAISF) announced the creation of a special eSports group. IOC delegates showed interest in approaching this
market, but underscored that there is still no unanimous decision about their inclusion—the gratuitous violence
of some videogames was a particular sticking point for some members.
Whether or not eSports are included in the Olympic Games, the mere creation of a special group under the
auspices of the IOC provides global legitimacy and suggests a bright future for this young movement. Exhibit 1
presents a list of milestones in the formalization of eSports in various countries.
Territorial Reach, Economic Dimensions, and New Consumption Patterns
According to Newzoo consultancy, 588 large eSports events took place in 2017 and generated $59 million
USD in ticket sales. 12 $5.5 million USD alone was generated during the League of Legends World
Championship, which attracted more than 80 million viewers worldwide.13 Newzoo also predicts that eSports
revenues will reach $906 million USD in 2018, and $1.6 billion USD by 2021 (See Figure 2).
This market has become very lucrative, not only for gamers, but also for videogame producers and brands.
Unlike traditional athletes, gamers can generate considerable income in a short amount of time, given that large
tournaments give out millions of dollars in prize money that is usually divided among the players on a winning
team. The teams and the producers see a share of ticket sales, merchandising, and television and advertising
rights. Epic Games’ Fortnite 2018 World Cup is expected to break records, as it already has more than 125
million registered players and a purse of $100 million USD.14
The exponential growth of the eSports market is sustained by the intense interest shown by sponsors. More
than 600 sponsorship agreements have been signed worldwide since the beginning of 2016, the majority by
brands within the sector, such as technology, software, or CITs (360). Brands outside the sector—like retail
10
Participating franchises were: Boston Celtics, Cleveland Cavaliers, Dallas Mavericks, Detroit Pistons, Golden State Warriors,
Indiana Pacers, Memphis Grizzlies, Miami Heat, Milwaukee Bucks, New York Knicks, Orlando Magic, Philadelphia 76ers,
Portland Trail Blazers, Sacramento Kings, Toronto Raptors, Utah Jazz and Washington Wizards. In its first edition the En Los
Angeles Lakers, Los Angeles Clippers, and the Chicago Bulls did not participate. La NBA 2K e-Sports League: 17 equipos del
mejor baloncesto (Marca, August 9, 2017). www.esports.marca.com/mas-esports/nba-2k-esports-league.html.
11
Statement from F.C. Barcelona Vice-President of Marketing and Communication, Manuel Arroyo: “Barça is attentive to what
is happening in this global and technological world, and given the major penetration and growth of eSports, is on the path to also
becoming a leader in this field. FC Barcelona, in keeping with its innovative spirit, has decided to participate in a pioneering
competition in the world of eSports, alongside the finest partners, KONAMI and eFootball.Pro. We are sure that this competition
will continue to make Barça members and fans that follow eSports around the world very proud.” (Official F.C.Barcelona
Announcement, February 27, 2018). www.efe.com/efe/espana/en-detalle/el-barcelona-se-adentra-en-los-esports-de-la-mano-gerar
d-pique/50000571-3541552.
12
2018 Global Esports Market Report (Newzoo, marzo 2018).
13
Information taken from League of Legends website, property of Riot Games (www.lolesports.com/en_US/articles/2017-events-
by-the-numbers) and the article: What is eSports? A look at an explosive billion-dollar industry. (CNN, August 27, 2018).
www.edition.cnn.com/2018/08/27/us/esports-what-is-video-game-professional-league-madden-trnd/index.html
14
Fortnite now boasts 125 million users—teases $100 million Fortnite World Cup (TechRadar, June 13, 2018).
www.techradar.com/news/fortnite-now-boasts-125-million-users-teases-dollar100-million-fortnite-world-cup.46 ANA
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(100), nonn-alcoholic beverages (moore than 50)), and onlinee services (m more than 400)—also had significant
155
presence. A breakdow wn of growth in eSports byy category forr 2017 can bee found in Figgure 3.
MILLIONS OF DOLLARS
$1,650
$2,000
$1,500 $906
$655
$1,000 $493
$500
$0
2016 2017 2018 2021
Fiigure 2. Globall eSports revenuue growth estim
mates. Source: 2018
2 Global Espports Market Report by Newzo
oo.
100%
Mercchandising and ticket
t sales
90%
80% Broaddcast rights
70% Publiishers' rights liccensing
60% Publiicity
50%
Sponnsorships
40%
30%
20%
10%
0%
Figure 3. Distribution
D by revenue
r categorry for global eS
Sports in 2017. Source: 2018 Global
G Esports M
Market Report by Newzoo.
The eppicenter of thhis activity iss not only in the U.S., but has expandeed very succeessfully to Assia, where it
is followedd very closelly on Twitch (a streamingg platform sp pecializing inn videogamess through wh hich eSports
reach millions of peoplee). Figure 4 shhows the terrritorial distrib
bution of worldwide revennue.
Beyonnd this markeet’s media innfluence and economic dy ynamism, it is important tto also mentiion some of
the repercuussions of its consumptionn habits it impplies. eSportss transform viideogames innto a formal and
a material
competitionn, with ruless, rankings, teams,
t prizes, grand evennts, spectatorss, live broadcasts, and ev
ven training
routines invvolving menttal and physiccal preparatioon. This turnss a simple enttertainment innto a professional career
built on meedia presencee and the ecoonomic impacct of its main n protagonistss, through whhich the gameer begins to
emulate thee elite sports star. Exhibit 2 presents a list
l of the mo ost important tournaments of 2017.
15
Informatioon from reportss: 2017 Global Esports
E Markett Report (Newzzoo) and The Niielsen’s eSportss Playbook 2017 (Nielsen).ANA
ALYZING TH
HE IMPACT OF VIRTUA
AL AND AUG
GMENTED R
REALITY 47
Syneergies Betw
ween eSports and Virttual & Auggmented Reeality
Two important
i asppects can be explored
e by analyzing
a thee synergies beetween virtuaal reality and augmented
reality:
(1) Sppace for develloping new games,
g be theyy evolutions ofo existing gaames or totallly new formaats.
(2) Toool(s) for impproving the consumption
c o eSports co
of ontent, be theey immersive games or no ot. Here it is
important tot separate thhe applicationn of virtual reaality and augm mented realitty in the worlld of videogammes.
Virtuaal reality (VRR) allows thee spectator too see gaming events in peerson from reemote locatio ons, while it
provides gamers with a new form of o vision and experience. Augmented reality r (AR) is used to inttegrate data
and informmation into thee game alreaddy visible to thet spectator, or to turn a game into a ssport, and theereby create
a communiity of playerss. Based on esstimates from m IDC, growth h predictions for virtual annd augmented d reality are
encouraginng. Global revvenues for thhis market aree expected to o increase from $5.2 millioon in 2016 to o more than
16
$162 millioon in 2020, which
w represennts a compouunded annual growth rate (CAGR)
( of 181.3%.
The market
m for deevices for booth VR and AR A is expectted to reach 13.7 units ssold, while fo or 2021 the
17
estimate grrows to 81.2 million—a
m CAGR of 56.1%.
Mobille AR game earnings rosse 12% in 20019 with Pokémon GO dominating d tthe segment. VR games
18
revenue rose by 41% duuring 2019, mainly
m due to the arrival off the Oculus Quest
Q .
South Korea
6%
China
C
18%
North Am
merica
38%
%
Rest of the World
W
38%
Figurre 4. Global terrritorial distributtion of eSports revenue. Sourcce: 2018 Globall Esports Markeet Report by Neewzoo.
Businness opportunnities in a market
m experriencing this kind of hyppergrowth arre obvious. When W such
potential iss combined with
w the rise of eSports discussed
d abo
ove, it has thee opportunityy to create diisruption of
massive prroportions—nnot only in thhe videogamee market, but also in the enntire entertainnment industrry. Because
it is importtant to analyzze this possibble integratioon with a focu
us on currentt experiencess and future projects,
p we
will examinne two speciffic cases.
16
Worldwidde Semiannual Augmented
A andd Virtual Realitty Spending Gu
uide (IDC, 20177).
17
Worldwidde Quarterly Auugmented and Virtual
V Reality Headset
H Trackeer (IDC, 2017).
18
SuperDataa Digital Gamees and Interactivve Media Year in Review, 2019 (Nielsen, 20220).48 ANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY
Furthermore, there is a strong synergy in the type of audiences in which both industries have penetration:
factors like tech savviness, owning gaming equipment, and interest in videogames in general, all make the
intersection between these industries naturally strong. There is also the fact that we find many repeat actors on
the offer side of both markets (e.g. Valve, Epic Games, Microsoft).
Analysis of eSport Case Studies
In this section we will analyze cases of representative eSports companies.
Virtual Reality Game Companies
RIGS. One of the first efforts to integrate videogames and virtual reality was the RIGS Mechanized
Combat League, developed in 2016 by Guerrilla Cambridge and distributed by Sony for PlayStation VR. The
game was configured as a mix of first-person shooter (FPS) and a sports format with characteristics similar to
basketball. The point of the game was to accomplish a series of missions using a group of giant robots that
engage each other in three-on-three combat.19
RIGS Mechanized Combat League quickly put through its paces in the eSports market with a number of
tournaments taking place in Japan, which demonstrated the enormous advantages this new modality offered for
publishers20.
Beginning with this project, a number of technical challenges arose for VR videogame programmers.
These mostly had to do with improving usability and competitiveness between players and teams, some
examples of which are:
Presentation of information and statistics: Two-dimensional menus do not function in a VR ecosystem.
indicators, cursors, and interfaces must be integrated into the scenery, organizing and classifying data in three
dimensions so that players and teams can make decisions more efficiently.
Sensation of immersion: Perspective is crucial in the VR environment and it is necessary to present
realistic points of view: for example, a player must be able to see the chassis of a car or the facade of a house
before entering them, or be able to perceive the depth of a street when looking down it and sensing the amount
of distance travelled on foot while preserving horizons and densities. Therefore, recreating the process of
reality in first person through movement and control of the character is fundamental if the player is to
completely identify with the game. This environment must also create tension and competition without causing
nausea and visual fatigue for participants.
Positional audio: The sensation of interacting with an object, passing through a scene, or carrying out any
specific activity is critical if the player is to be immersed totally in the game. As such, developers must
introduce more and better sounds that establish nuances like distance and intensity, projecting audio based on
19
Piers Jackson, head of game development at Guerrilla Cambridge, described the process of creating a game thusly, “Being an
external study, we had long embraced the idea of Virtual Reality, and we were thinking of developing a first-person shooter but
finally decided to do something unique in VR, a new experience. We basically fused the combat of a first-person shooter with
sports, and that is how RIGS came about. We felt it fit perfectly with PlayStation VR because it was an innovative and attractive
game for players. It was also a perfect challenge for a study like ours. There are a lot of games that have “twists, but in all of them
the machines are like tanks, and from the very beginning we decided that in RIGS we wanted the robots to be like Formula 1 cars.”
(interview by Nacho Castañón for Alfabetajuego, December 20, 2016).
www.alfabetajuega.com/noticia/piers-jackson-el-futuro-de-guerrilla-para-la-realidad-virtual-es-seguir-trabajando-en-rigs-n-77601.
20
Hermen Hulst, director and founder of Guerrilla Games, confirmed “We had a few eSports teams playing RIGS on a stage in
Tokyo and the emotion there was incredible. It is the type of game that fits perfectly with this kind of competitiveness.” (interview
by Alex CD for Vida Extra, October 8, 2016). www.vidaextra.com/entrevistas/la-realidad-virtual-ha-venido-para-quedarse-entrev
istamos-a-hermen-hulst-director-y-fundador-de-guerrilla-games.ANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY 49
positional factors.
DOTA VR Hub21. In 2016, Valve (developer of both the popular DOTA 2 game and the Vive VR headset)
launched a special VR spectator mode called DOTA VR Hub, as a Downloadable Content (DLC) of the game.
Many of the aspects discussed in the case above are addressed in this experience.
Feeling of immersion: DOTA VR Hub starts by using the traditional perspective of spectator mode to
provide a sense of familiarity for players. There is also the option to “enter” the world of the game. This
perspective increases the sensation of immersion at the cost of limiting the game’s original perspective. The
user can switch between both types of perspective at any time.
Presentation of information and statistics: Thanks to the decision to provide a choice between perspectives,
DOTA VR Hub makes complete use of virtual space while using a “traditional” perspective to view the game.
This consists of showing complete game statistics with the details of each individual player. Normally,
presenting that much information at the same time would be overwhelming for a spectator. Sharing it in the
virtual space, however, makes it much more accessible. Valve’s proposal is a combination of floating panels
and 3-D models of each character.
DOTA VR Hub is notable because it represents a significant effort on the part of a publisher to improve
the consumer experience of an already existing eSport using VR. A limiting factor for this chaotic type of game
in particular is the need for high-level gaming teams to enjoy the experience.
Virtual Reality and Video Streaming Companies
Sliver.tv and YBVR. These two companies have proposed, at different times, utilizing video streaming
technology in virtual reality to improve the eSports experience, and eliminating the need for expensive,
high-performance equipment.
The proposal calls for combining the perspective of the various players into one immersive video (of 360
or 180 degrees), and transmitting it as a single video that can be accessed on any device with an Internet
connection. Like a VR backdrop, it could be a 360 degree video or a virtual camera inside the game itself,
depending on the possibilities programmed by the publisher.
Sliver.tv has produced a pilot for their proposal with the game CS: GO, and YBVR with Fortnite. Both
companies promise to provide any eSport with the opportunity to be a completely immersive experience.
Augmented Reality and Techno Sports Companies
MELEAP—Hado. In 2016, the Japanese company Meleap presented Hado, the first physical activity
augmented reality game based on firing simulated balls of energy. The print media dubbed this new activity
techno sport.22
Hado only requires a smartphone, a movement sensor, and augmented reality to allow users to run, jump,
and move within a field of play. The team that gains the most points during a determined period is the winner.
The game has been so successful that the Hado World Cup has been held since 2016, and attracts competitors
from various countries—in 2018 will feature a winning prize of $120,000 USD.
The case of Hado shows that eSport competitions can be developed without access to large and expensive
21
Spectating Dota 2 in VR is amazing, watch it in action (Polygon, July 29, 2016).
www.polygon.com/2016/7/29/12325418/dota-2-vr-valve-vive.
22
Japanese AR Phenomenon HADO Holding Their Second World Cup (Gamehubs, October 11, 2017).
www.gamehubs.com/article.php?id=japanese-ar-phenomenon-hado-holding-their-second-world-cup.50 ANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY
devices or games with advanced graphics. It also presents new ways to create compatibility with current games
and those that incorporate virtual reality, and provides more technological impact by adding additional
playability. AR also received quite a boost from Apple’s 2017 launch of the ARkit app, which allows users to
easily create AR experiences through iPhone and iPad23.
Designing the Future of eSports
It would be foolish to ignore the opportunity inherent in the successful merging of AR and VR with
eSports. However, there are certain considerations that link the successful construction of this emerging market
with its ability to attract diverse audiences, and an evolution of the business model centered on immersive
technologies.
Advancing Toward More Spectacle
eSports have become a viral phenomenon that attracts followers around the world through expanding
media exposure. The industry has become more prosperous as it migrates away from a specialized sphere of
hardcore gamers and is marketed toward a more diverse public. We agree with Morse’s (2003) suggestion that
the economic success of this activity will be based on its ability to deploy a strategy of increasing showmanship
throughout the industry. This implies adopting the same commercial sponsors and the same audio-visual
aesthetic enjoyed by the majority of conventional sports.
Considering the current ecosystem and the pretensions of the relevant actors, we estimate that to increase
the spectacle of eSports, the industry must focus on three main objectives:
y Decentralization of the business model dominated by Publishers;
y Permanent innovation through startups that renew the experience;
y Expanding the phenomenon to other categories of actors.
Below we expand on the details of each objective:
Decentralizing the Business Model Dominated by Publishers
The coming years will see a decrease in the importance of publishers, whose role will be progressively
reduced by the decentralization of revenues in the market. This will be mirrored by an increasing role for
sponsors and broadcasters, as they invest more and more in image, content, and broadcasting rights,
reproducing the environment that exists in many traditional sports leagues.
Currently, publishers own most of the rights to eSports events, but only a small number of these have
evolved toward a more flexible business model. This blocks significant changes to conceptions of intellectual
property and other such issues that are indispensible in overcoming current legal limitations.
On the part of broadcasters, platforms like Amazon’s Twitch and Google’s YouTube Gaming seek to
maintain their predominant position. However, other media giants are making waves—for example Facebook’s
alliance with ESL24, and the menacing presence of content-hungry global competitors like HBO, Disney, Hulu,
and Netflix, and regional actors like Movistar and Blim in Spain and Mexico.
23
Apple se lanza a la realidad aumentada con ARKit (CNET, June 5, 2017).
www.cnet.com/es/noticias/apple-realidad-aumentada-wwdc-2017)。
24
ESL announced on January 18, 2018 that it would broadcast two major videogame competitions exclusively on Facebook Live,
and a weekly program on Dota on Facebook Watch. Facebook and ESL have agreed to bring 5,000 hours of content to the social
media network (Facebook será el hogarexclusivo de dos grandestorneos de ‘eSports’, CNET, January 18, 2018).
www.cnet.com/es/noticias/facebook-watch-torneos-esports.ANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY 51
Permanent Innovation Through Startups That Renew the Experience
The combination of VR and AR with eSports presents opportunities for complementary business through
the development of platforms and new devices (gadgets). An exciting network of startups is starting to grow
around these platforms and gadgets, lending a new level of creativity and innovation to the market. These
entrepreneurs are orienting their ideas toward the continual renovation of this type of entertainment, and taking
advantage of the more fertile ground of eSports—with stricter and more rigid schemes, traditional sports are not
as prone to welcoming novel ideas and innovation.25
Some examples of these novel products are micro-fluid technology gloves that situate players in three
dimensional environments, full-body suits that function like a second skin and capture and translate movements
with thermal control, platforms that accelerate distribution and player winnings using blockchain, or artificial
intelligence used to analyze sponsor profitability.
Table 4 shows a sample of disruptive startups entering the eSports business. These companies will
contribute greatly to growing this market while at the same time making the entire ecosystem more dynamic.
This will help promote greater connection between sports clubs, publishers, and investors through competitions,
grants, and meetings that allow for more access to funding.
Table 4
Disruptive Startups in the eSports Industry
Startup Country Activity
HaptX Inc United States Producing gloves using micro-fluid technology
Tesla Suit United States Whole-body suits with thermal control
Razer United States Development of products for gamers
Bountie Singapore Blockchain monetization platform
DreamTeam Singapore Blockchain payment gateway
Unikrn Singapore Platform for betting and sale/purchase of sports clubs with blockchain
Blinkfire Spain Intelligence and artificial vision technology for real-time analysis by eSports sponsors
Streamloots Spain Tool to unite streamers and spectators in an entertaining fashion
Pixel Esports Club Mexico Improves professionalization of videogame competitions
Source: Developed by the authors.
Expanding the eSports Phenomenon to Other Categories of Actors
Although at first glance eSports seem bound by a complex system, the truth is that it is still an immature
market with few actors, high concentration, and relative diffusion compared to traditional sports. In order to
take definitive steps in attracting widespread consideration from analogue businesses, it is necessary that new
protagonists enter and fine tune the architecture of this market—adding more value, complexity, and
institutionalization to the competitive nature established by tournaments and sports clubs.
In the near future, it is likely that new relevant actors will spring up in the market. Among these
newcomers may be startup entrepreneurs that regenerate the ecosystem; large investors that want to acquire
sports clubs; agents that help gamers professionalize their careers and make their commercial image more
profitable; physical trainers and sports psychologists that motivate, train, and educate future stars; scouts and
25
In the world of soccer, the great innovation of the past few decades has been the introduction of Video Assistant Referee (VAR),
which allows the referee to refer to game video in four cases of doubt: penalties, ejections, confusion in assigning cards, and goals.
In other sports these changes are usually discussed as an update of the rules.52 ANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY
headhunters that search for talent among gamers and managers from all over the world, collaborating closely
with sports clubs.
It is important to note that all of this supposes that eSports will be considered a target for investment with
the potential for creating wealth; one that is capable of attracting tangible and intangible revenue and creating
new specialized jobs.
Moreover, it is expected that eSports will garner much more attention from journalists, bloggers and other
influencers, creating more content in the form of information and opinion that increases knowledge about this
activity. This will pave the way for the entrance of streamers that want to broadcast games online; insurance
companies that will insure players and clubs; and the proliferation of new curricula at universities and business
schools that take this kind of knowledge into account.26 Finally, there is the potential for duplication, with
recognized sports entities building presence in this new market—as is already happening—and famous
traditional athletes building their “altar egos” as eSports athletes.
Final Reflection
Evolution & Challenges to the Business Model Introducing an Immersive Experience
The open questions surrounding the introduction of virtual reality video games are symptoms common to
any new developing technology. In this case, normal doubts are exacerbated by the speed with which these
games are popularizing among digital natives, the peculiarity of the players and clubs, and by the desire on the
part of spectators and sponsors to be part of this transformative entertainment.
Although the integration of VR and AR with eSports is a forgone conclusion, new patterns of consumption
in the Network Society lead us to believe that this transition will have to go through various stages of
improvement to achieve a profitable, scalable, and synergistic symbiosis.
In spite of their obvious potential, we do not believe that it yet provides a completely innovative or
satisfactory experience. This not only applies to the current principle actors—hungry to build a more aesthetic
and sensitive commercial relationship—but also for those that consider themselves outside of this market.
Among those falling in this segment are: generations older than millennials, centennials, females, persons with
disabilities27, and companies outside of the field of technology.
It must be made clear that, in their current structure, audiences at these kinds of events are only looking at
players that are seated in from of monitors, which makes the product or game more important than the
ecosystem surrounding it. It is, therefore, more of an analogue and static experience than a digital and dynamic
one. This can cause attendees to become bored and even cause the business model to stagnate—turning eSports
into a fleeting fashion or niche hobby.
On the other hand, we believe that it is highly relevant that companies with cash reserves and tech-industry
dominance such as Google, Facebook, Microsoft, Sony or Amazon have shown their interest in competing in
the game streaming service, especially Amazon, who with companies like Twitch, Amazon Game Studios and
26
e-Sports have already arrived at the main universities in the United States, which now offer them as university sports
(www.onlinecollegeplan.com/league-of-legends-esports-gamers). Other academic institutions have begun to give eSports
scholarships for games like League of Legends and Overwatch. In Spain, the first online university dedicated to eSports has been
established: Playeek (www.playeek.com/es/academy).
27
The opportunity to include individuals suffering from physical and mental limitations in eSports is of particular interest, given
their ability to break down barriers and allow their participation in sports in digital space.ANALYZING THE IMPACT OF VIRTUAL AND AUGMENTED REALITY 53
Amazon Prime could become a great trigger for the market28.
In our judgment, the opportunity to adequately sustain hypergrowth in this market lies in the introduction
of more immersive technologies. For example, introducing VR would force players to physically move around
the scenery, while spectators—if they choose—can watch the action from inside the game itself. Introducing
AR would allow spectators, sports clubs, and sponsors to interact and communicate with one another, and share
ample and heterogeneous information in real time—this would represent a broad-spectrum marketing
revolution. With this technological leap, eSport could solidify growth with more differentiation, resulting in
more remarkable and profitable events where spectators can enjoy a completely different experience compared
with the standard eSports tournaments.
However,we also expressed scepticism over whether VR would take over eSports, saying the cost and
complexity of the devices could prove prohibitive for many gamers and spectators, as could a lack of
bandwidth.
Despite that the apparent surge of newer, cheaper, and simpler hardware is a cause for optimism in the
long term. It has the potential to place VR and AR technology within reach of a growing number of companies
and individuals, motivating players, clubs, publishers, sponsors, broadcasters, and spectators to diffuse a wide
variety of content, activities, and emotions that strengthen the sense of belonging and interconnectedness
among actors.
What is certain is that it is still difficult to delimit the potential of this new market—its accelerated growth,
the appearance of large brands, and the fervor of investors distorts its true reach, and creates a deceiving
landscape in which certain risks and challenges are hidden, as is the risk that this market is being overestimated.
However, this does not contradict its potential to be a high-impact global industry that, when combined with
AR and VR, could take on a character equal to or more important than traditional sports.
In our opinion, VR and AR could also put an end definitively to the debate about whether eSports can
really be considered a sport, by getting players to be physically active.
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28
Amazon took a big step into the gaming industry with the launch of Crucible, a free-to-play online shooter and the company’s
first original big-budget game (https://www.theverge.com/2020/5/5/21246923/amazon-crucible-relentless-studio-free-to-play-laun
ch-date-may-20).You can also read
